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Forest Laboratories Inc (NYSE:FRX)
Beneish M-Score
-3.03 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Forest Laboratories Inc has a M-score of -3.03 suggests that the company is not a manipulator.

FRX' s 10-Year Beneish M-Score Range
Min: -4.96   Max: -1.45
Current: -3.03

-4.96
-1.45

During the past 13 years, the highest Beneish M-Score of Forest Laboratories Inc was -1.45. The lowest was -4.96. And the median was -2.46.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Forest Laboratories Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 0.9136+0.528 * 0.9957+0.404 * 0.8532+0.892 * 1.0175+0.115 * 0.8761
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0345+4.679 * -0.0196-0.327 * 1.9566
=-3.03

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $370 Mil.
Revenue was 878.396 + 855.255 + 832.935 + 845.949 = $3,413 Mil.
Gross Profit was 696.126 + 691.537 + 667.568 + 668.123 = $2,723 Mil.
Total Current Assets was $4,293 Mil.
Total Assets was $9,059 Mil.
Property, Plant and Equipment(Net PPE) was $396 Mil.
Depreciation, Depletion and Amortization(DDA) was $182 Mil.
Selling, General & Admin. Expense(SGA) was $1,680 Mil.
Total Current Liabilities was $1,040 Mil.
Long-Term Debt was $1,200 Mil.
Net Income was 17.961 + 69.987 + 23.278 + 45.443 = $157 Mil.
Non Operating Income was 0 + -7.801 + -4.164 + -29.15 = $-41 Mil.
Cash Flow from Operations was 202.934 + 156.134 + -28.196 + 44.813 = $376 Mil.
Accounts Receivable was $398 Mil.
Revenue was 716.281 + 760.637 + 821.127 + 1055.713 = $3,354 Mil.
Gross Profit was 562.97 + 610.914 + 652.904 + 838.139 = $2,665 Mil.
Total Current Assets was $2,877 Mil.
Total Assets was $7,485 Mil.
Property, Plant and Equipment(Net PPE) was $376 Mil.
Depreciation, Depletion and Amortization(DDA) was $143 Mil.
Selling, General & Admin. Expense(SGA) was $1,596 Mil.
Total Current Liabilities was $946 Mil.
Long-Term Debt was $0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(369.881 / 3412.535) / (397.909 / 3353.758)
=0.10838892 / 0.11864571
=0.9136

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(691.537 / 3353.758) / (696.126 / 3412.535)
=0.79460921 / 0.79804427
=0.9957

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (4293.118 + 395.573) / 9058.742) / (1 - (2876.855 + 376.045) / 7485.31)
=0.48241257 / 0.56542882
=0.8532

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3412.535 / 3353.758
=1.0175

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(143.212 / (143.212 + 376.045)) / (181.744 / (181.744 + 395.573))
=0.27580177 / 0.31480798
=0.8761

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(1680.136 / 3412.535) / (1596.127 / 3353.758)
=0.4923425 / 0.47592194
=1.0345

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((1200 + 1040.03) / 9058.742) / ((0 + 945.99) / 7485.31)
=0.24727826 / 0.12637954
=1.9566

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(156.669 - -41.115 - 375.685) / 9058.742
=-0.0196

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Forest Laboratories Inc has a M-score of -3.03 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Forest Laboratories Inc Annual Data

Mar04Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13
DSRI 1.26610.94451.20990.89861.04560.98550.99011.0680.84911.4864
GMI 1.00550.98531.00280.9960.98980.99951.01570.9970.99940.9874
AQI 1.10161.02071.00431.38281.05720.81441.03590.9142.43941.1922
SGI 1.18281.18950.93761.16181.11461.02251.06881.05411.03760.6817
DEPI 1.14821.23130.68120.90761.05370.95211.03321.13570.73510.9002
SGAI 1.06490.92711.10710.87310.99021.24850.80231.05211.06771.4717
LVGI 0.80950.97180.88691.27310.78571.16591.00020.86070.88651.0888
TATA 0.0217-0.00940.0469-0.1189-0.0258-0.0438-0.0485-0.0103-0.0591-0.0181
M-score -1.86-2.36-2.14-2.91-2.36-2.86-2.59-2.40-2.29-2.45

Forest Laboratories Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.1831.08780.84910.78990.87270.90541.4781.59371.21630.9136
GMI 0.99150.99430.99940.99430.98560.9840.98590.98780.99450.9957
AQI 2.17552.29782.43941.11561.17211.32811.19221.17551.08940.8532
SGI 1.07241.07631.03760.94460.83890.71840.68560.74160.8451.0175
DEPI 0.8710.69310.73510.77570.86810.89440.90020.88670.85690.8761
SGAI 0.9271.01281.06771.27311.34681.48671.46331.38451.25141.0345
LVGI 0.88720.92220.88650.75650.79810.94681.08881.15671.12491.9566
TATA -0.0097-0.0228-0.0591-0.0486-0.0394-0.054-0.0158-0.0043-0.0155-0.0196
M-score -1.79-1.93-2.29-2.90-2.87-3.03-2.44-2.25-2.56-3.03
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